Exclusive: Libya needs $60bn to overhaul energy infrastructure, says NOC chairman

Libya needs up to $60 billion in investment to revive its energy industry, with $40bn required to raise refining capacity to a million barrels per day, with the remainder being channelled over the next five years in development of upstream infrastructure, the chairman of Libya’s National Oil Corporation said.

"For the next five years $20bn is required [upstream], for downstream we have to validate the study with Wood Group. So total requirement would be $60bn," Mustafa Sanalla the head of Libya's NOC told The National in an interview in Abu Dhabi.

Talks are underway with the UK energy services firm Wood Group to prepare a study on overhauling the country’s refining assets, with plans for grassroots integrated refining and petrochemicals plants, Mr Sanalla said.

Libya, which has some of the cheapest, largely sweet oil in northern Africa, has seen much of its production remain offline during the bloody civil war that erupted between rival factions following the downfall of Muammar Qaddafi in 2011. Production, which had remained at about 1.75 million bpd then fell by 850,000 bpd over the succeeding years as protests and blockades prevented export of crude via the the country’s key port terminals.

However, following the handover of key Libyan ports Ras Lanuf, Es Sider, Zueitina and Hariga in June, Libya has managed to get more crude to the markets, with current production in the range of 1.2 to 1.3 million bpd, according to Mr Sanalla. Production has averaged a million bpd for this year, a figure that Mr Sanalla hopes to raise to two million bpd in four year's time.

"By 2022 we are going to have more than two million bpd of oil, and more three billion standard cubic feet of gas, so we need a total of $20bn for the next five years, so this [is going] to increase production,” he added.

The investment would be channeled into the rehabilitation of oil fields, particularly the damaged ones, which have taken around 150,000 bpd offline, he said.

“We could add more than hundreds of thousands of barrels per day if we do some repair on pumps, generators,” said Mr Sanalla.

Libya’s state-backed producer, which received revenues from its hydrocarbons assets - including from the eastern provinces - of $1.66bn in September said revenues for the first nine months of the year totalled nearly $17bn.

"Last year’s total [was] $13bn and the year before only $4bn," he said, adding, "This is for the whole of Libya’s oil, gas, petrochemicals, royalties and taxation.”

The company has struggled with its budgets and payments from the east but the overall situation is better than previous years, with the government benefitting from better oil and gas revenues, Mr Sanalla said.

Upstream, the country is currently preparing bids for (A&E) blocks offshore to the north of the country, a “mega-project” valued between $4bn and $5bn, he said.

"By 2019 hopefully the bid will be ready and then we will start immediately," Mr Sanalla said. "We had meetings last week with Mr Descalzi [of Eni] in Tripoli with his staff to discuss opportunities...and how to maintain and sustain production,” Mr Sanalla said.

NOC is also betting on the establishment of its fully-owned Zallaf Company to revive production. Mr Sanalla said he hopes to see the “first drop of oil hopefully by end of 2019,” from Zallaf's assets. The company will focus on production from the country’s south west, besides focusing on the Sidra and Ras Lanouf terminals, which have now come under the control of the UN-backed Government of National Accord.

“We have a bottleneck there on the storage capacity, so hundreds of millions of US dollars [are needed] only for the storage tanks in Sidra and Ras Lanouf,” said Mr Sanalla.

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Work on the ports, which prior to protests, had a collective total capacity of 240,000 bpd, was being fast-tracked to expedite exports to get them up and running by next year.

“We have an agreement with the GNA government on how to fast-track the maintenance and recovery because we have a big problem in the storage capacity," said Mr Sanalla. "We couldn’t have the logistics...to export easily. So we’re leveraging our staff, our operations, to make easy exportation.”

Libya, which has 50.5 trillion cubic feet of proven gas reserves is also looking to ramp up production of the cleaner fuel for domestic consumption as well as for export via its Greenstream pipeline to Italy.

The addition of 10 new wells through a mega project being executed with Italian energy company Eni in Bahr Essalam in the country’s north-west could see additional gas flowing through the pipeline.

“By the end of this year a total of 10 wells will be online," said Mr Sanalla. "This will give us room for more production and we’re targeting to produce a total of 1.1 billion standard cubic feet per day. This will give more gas production and we could export [via Greenstream].”

More gas production could also come on stream from the onshore Al Wafa field. Through its partnership with Eni, NOC aims to increase production from the field by 70 million standard cubic feet per day, he said.

Current capacity on the 540km-long pipeline is around 301 million standard cubic feet, “less than 30 per cent,” Mr Sanalla said. Priority is being accorded to the Libyan market.

Downstream, the state producer has plans to raise refining capacity to a million bpd from its current 350,000 bpd.

"We’re still importing more than 70 per cent of our needs from outside, we don’t have enough capacity to refine, so we have done a feasibility study and we are trying now to revive,” said Mr Sanalla.

Negotiations are underway with Wood Group “for the selection of a refining scheme associated with petrochemicals,” he said. "We’re going to sign a contract with them very soon...maybe before the end of this year and hopefully they can do a feasibility study of the downstream.”

NOC, which estimates costs for refining overhauls in the range of $40bn, will look for joint ventures with international oil companies. The construction of a grassroots refinery in Tobruk to the far east, near the Egyptian border is on the books.

The country’s largest refinery is at Zawiya, west of Tripoli, where NOC is planning to double refining capacity from to 250,000 bpd from 120,000 bpd at present.

“We are having also to expand Ras Lanouf complex...and also to expand Marsa el-Brega complex and...have a new petrochemicals complex west of Benghazi... but we have to make validation of the study with Wood Group,” he said.